A general equilibrium interpretation of damage-contingent securities

R. Anton Braun, Richard M. Todd, Neil Wallace

Research output: Contribution to journalArticlepeer-review

5 Scopus citations


Cass, Chichilnisky, and Wu (1996) show in an endowment economy that mutual insurance and securities contingent on aggregate states support optimal risk-sharing. We extend their result to a model with production in which risk is endogenous and beliefs about the aggregate state vary across individuals. We use the model to interpret the role of new securities that are contingent on measures of total damage from natural catastrophes. Plausible special cases of the model predict the trade pattern in such securities across diverse regions and predict that such securities will not represent actuarially fair gambles.

Original languageEnglish (US)
Pages (from-to)583-595
Number of pages13
JournalJournal of Risk and Insurance
Issue number4
StatePublished - Dec 1999

All Science Journal Classification (ASJC) codes

  • Accounting
  • Finance
  • Economics and Econometrics


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